Retail Rockstars: 3 Stocks That Have Top Funds Feeling the Love
As I noted in a previous column, Investor’s Business Daily regularly publishes “New Buys of Top-Performing Stock Funds,” identifying equities that top-performing stock funds bought in large quantities. Often, the biggest funds ultimately play a huge role in determining stock prices. These funds have methods of obtaining key information about companies and sectors that retail investors cannot access. For example, they may interview top industry experts or regularly speak with the CEOs of other firms within the sector to obtain more information about the opportunities and challenges facing the spaces.
As a result of these points, it’s worthwhile for retail investors to keep track of and at times emulate the stock purchases of top funds. Additionally, with retail sales having risen by a strong, seasonally adjusted 0.6% in December, retail stocks should perform well going forward. Here are three names from the sector that many top funds embraced in the third quarter.
RB Global (RBA)
Source: Mike Mareen / Shutterstock
RB Global (NYSE:RBA), formerly known as Ritchie Bros, operates “an omnichannel marketplace…for buyers and sellers of commercial assets and vehicles worldwide.” Specialties include “excavators, dozers and commercial trucks.” It also markets certain types of equipment.
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In Q3, an impressive 21 top funds acquired a huge $1.86 billion of RBA stock, according to Investor’s Business Daily.
In March, RBA merged with IAA, a “digital vehicle marketplace.” The firms say that they will realize significant cost synergies from the deal. According to Seeking Alpha columnist Caffital Research, the combined companies generated an impressive compound annual growth rate of 12.4% from 2002 to 2022.
Also importantly, RBA is likely to benefit from a reduction in interest rates this year since lower rates tend to increase the number of expensive vehicles that companies and consumers buy.
Analysts, on average, expect the company’s earnings per share to climb to $3.01 this year from $2.77 in 2023.
O’Reilly Automotive (ORLY)
Source: Shutterstock
O’Reilly Auto (NASDAQ:ORLY) sells auto parts to consumers and retailers. The company is benefiting from the relatively high age of vehicles in the U.S. Indeed, “The average age of passenger cars and light trucks in the United States has risen to a new record of 12.5 years,” representing a three-month increase versus the end of 2022 and setting a new record.
Additionally, there have been large increases in the cost of both new and used vehicles in America in the last several years. The latter trend is likely to cause the former pattern to intensify going forward.
ORLY tends to benefit from higher average vehicle ages because older vehicles usually need to be repaired much more often than younger ones.
In Q3, 11 top funds bought $18 million of ORLY stock, according to Investor’s Business Daily. In December, Goldman Sachs had a “buy” rating on ORLY. Meanwhile, analysts, on average, expect ORLY’s earnings per share to climb to $42.82 this year from $38.34 last year.
TJX (TJX)
Source: Joe Hendrickson / Shutterstock.com
TJX (NYSE:TJX) is a discount retailer that owns and operates the popular T.J. Maxx and Marshalls chain. I occasionally visit T.J. Maxx and Marshalls stores, and they are almost always quite crowded.
In Q3, 22 funds spent $55 million on TJX stock, according to Investor’s Business Daily.
The stock has almost 2,000 institutional investors.
On Jan. 22, Morgan Stanley (NYSE:MS) included TJX on a list of “high-quality stocks” that it believes are well-positioned to outperform in 2024.
Analysts, on average, expect TJX’s earnings per share to jump to $3.75 this year from $3.12 last year.
Given the high price increases on apparel in recent years, many consumers should continue to flock to TJX’s stores.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.
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